Top 20 contract awards projected to be billions of dollars smaller in 2013

Oct. 10, 2012 - 06:31PM
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Ray Bjorklund is chief knowledge officer at Deltek. ()

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Agencies are expected to open markedly smaller contracts for competition in the coming year, a new market analysis shows.

The top 20 contracts anticipated for fiscal 2013 represent about $92 billion, a 38 percent decrease from the total value of last year’s top 20, which totaled $148.5 billion, according to a report by Deltek market researchers released Wednesday.

For example, the smallest contract included on Deltek’s top 20 list last year was the Defense Department’s contract, to research threats involving weapons of mass destruction, worth $2 billion. This year, the smallest contract, for health marketing communication services at the Centers for Disease Control and Prevention, has an estimated value of $870 million.

The top contracts for both years are relatively the same in size. Last year’s top contract, the Army’s Enhanced Army Global Logistics Enterprise (EAGLE) contract, worth up to $23.5 billion, was awarded in September. The No. 2 contract in 2012, the Air Force’s Training Systems Acquisition III program, worth $21 billion, is the top contract for 2013.

“Certainly 2013 and 2014 are looking to be kind of the low point in the cycle that we’re in of declining spending,” said Kevin Plexico, vice president of Deltek’s federal information solutions. “We think it will pick back up after that.”

Smaller contract values have also been driven by guidance from federal procurement officials and DoD to limit the number and size of contracts, Deltek analysts said.

Starting in fiscal 2013, agencies are required to justify new indefinite-delivery, indefinite-quantity contracts worth more than $100 million to the Office of Federal Procurement Policy to ensure they do not overlap with existing contracts. OFPP directed agencies in fiscal 2012 to justify new contracts that cover multiple agencies and are worth more than $250 million, as well as all governmentwide acquisition vehicles.

Contracting officers are probably planning to use other vehicles when they can, so the ceiling value on new contracts they propose do not have to be as high, said Ray Bjorklund, chief knowledge officer at Deltek.

“It’s the recognition that there are other contract vehicles out there that are very viable, and you don’t necessarily have to have your own uniquely configured [indefinite-delivery, indefinite quantity contract],” he said.

The Defense Department directed agencies to shorten the length of service contracts, from the traditional five-year term to three years, which also lowers the amount of money that agencies expect to spend under their contracts, Bjorklund said.

Defense agencies also are supposed to notify the Defense Procurement and Acquisition Policy director of any proposed acquisition of services with an estimated value of $1 billion or more.

Defense agencies have chosen to use smaller contracts because they don’t warrant the additional approvals and processes that multibillion-dollar programs require, Plexico said.

“We’re starting to see a decline in the average size, trying to bring those opportunities down to make them a little easier to move through the acquisition process,” he said.